IMF’s decision triggers dollar run in Mozambique

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IMF’s decision triggers dollar run in Mozambique

11:33 CAT | 19 Apr 2016

The Centre for Public Integrity (CIP) says that the cancellation of the International Monetary Fund (IMF) mission to Mozambique because of an undisclosed $1 billion loan has already boosted the dollar exchange rate in the informal sector and may affect government finances, namely through disbursements from partners.

The IMF visit was scheduled for this week but was cancelled because of doubts around the loan to the ProIndicus company, established by the Mozambican government for the purchase of military equipment.

In an attempt to retrieve the situation, Prime Minister Carlos Agostinho do Rosário arrives in Washington today for discussions.

The CIP’s Celeste Banze, in charge of the governance NGO’s revenue and public expenditure portfolio, told Voice of America that the IMF decision will have serious implications for the Mozambican economy.

“What we will see in the short term is the reduction of investors’ expectations. Mozambique is lagging behind in terms of foreign capital flows and the IMF’s decision will further deteriorate the country’s ability to benefit from them,” Banze said.

Banze also said that the events would immediately have an impact on the exchange rate and said that “on Monday 18, the dollar was being traded in the informal market at 60.50 meticais”, compared to just over 50 last week.

Economist João Mosca said that serious work on Mozambican sovereign debt is needed, “because there are many transparency gaps and many issues that are not clear”.

The Frelimo Central Committee, whose meeting in Matola ended on Saturday, instructed the government to publicly clarify the Ematum and ProIndicus debts.

Source: Voa Portugues